The labor market is receiving increasing attention in the New Keynesian literature. In this paper I critically survey this literature in order to highlight the role played by wage rigidities in the explanation of fluctuations caused by technology shocks. To this aim, I present a DSGE model with...

Real wage rigidity is known to create a substantial trade-off between inflation and employment stabilization for monetary policy in New Keynesian models with search frictions on the labor market. This paper shows that, quantitatively, this finding hinges very much on the assumption of constant...

The labor market is receiving increasing attention in the New Keynesian literature. In this paper I critically survey this literature in order to highlight the role played by wage rigidities in the explanation of fluctuations caused by technology shocks. To this aim, I present a DSGE model with...

Calvo pricing implies output gains, while Rotemberg pricing implies output losses after a disinflation. Introducing real wage rigidities has opposite effects: it generates a long-lasting boom in output in Calvo, and a moderate output slump in Rotemberg.

The authors of this paper formulate a disequilibrium AS-AD model based on sticky wages and prices, perfect foresight of current inflation rates and adaptive expectations concerning the inflation climate in which the economy operates. The model consists of a wage and a price Phillips curves, a...

The paper studies the effects of credible disinflation in the presence of real wage rigidity, comparing the Calvo and Rotemberg price setting mechanisms (the two popular variants of the New-Keynesian model). In both types of models, a credible, gradual disinflation is shown to lead to a delayed...